Economics

Ukraine's new bail-out

ON JANUARY 21st the Ukrainian government and the IMF announced that Ukraine would be seeking a new, bigger bail-out. They also announced that they would start negotiating with foreign creditors, in an attempt to reduce the amount of money the Ukrainian government owes. There was talk that the end of an IMF mission to Kiev, planned for January 30th, would herald some big announcements. But still nothing has happened. What’s gone wrong?

Ukraine needs all the help it can get. In 2014 GDP shrank by nearly a tenth. The currency, the hryvnia, fell by more than 50%. As the cost of imports rose, inflation jumped, from 1% a year ago to 25%.

America's budget for 2016

AMERICA'S federal budget is less an exercise in accountancy and more a piece of political showmanship, especially when, as now, opposing parties control the presidency and Congress. This year's budget, released on February 2nd, was no different. President Barack Obama presented a long financial wish-list to Congress, calling for higher domestic and military spending, paid for by raising taxes on the wealthy and by borrowing more. It is time to "replace mindless austerity with smart investments that strengthen America", Mr Obama proudly declared.

Oil prices and Nigeria

LOW OIL prices are not good for the Nigerian economy. In its latest forecasts, the IMF's predictions for the Nigerian economy in 2015 have been cut—from over 7% growth to about 5%. The naira, Nigeria's currency, is doing badly. But what are the effects of lower oil prices in different parts of the country?

If new research from two Oxford economists is anything to go by, people in the largely Christian south of the country will do worse than those in the largely Muslim north. The paper looks at the human impacts of oil-price changes. It uses data on 34,000 women between the ages of 15 and 49 taken from the 2008 Nigerian “Demographic and Health Survey” (DHS).

Bringing dead economists back to life

TIRED of lightweights bickering over the financial crisis and its aftermath? Of economic upheaval becoming merely fodder for intellectually dishonest political campaigns? Wonder what biggest thinkers might have to say? Our efforts to consult the giants of economics have been hampered by an unfortunate fact: many of the most important ones are not only dead, but they died long before governments and central banks began to concoct such unconventional policy tools such as quantitative easing. That explains their absence from the argument—so far.

Britain's elderly

BRITAIN'S pensioners are a spoiled lot. They benefit from perks such as free bus travel and free television licences, and do not have to pay national insurance, one of Britain's two income taxes, on their private earnings. Last week George Osborne, chancellor of the exchequer, introduced new savings bonds exclusively for over-65s. The bonds have an artificially high rate: the government will pay 4% to borrow from oldies for three years, versus a three-year gilt yield of around 0.6%. This does not chime well with the chancellor's professed policy priority of keeping Britain's borrowing costs down.

Energy subsidies

SINCE publishing our package on energy subsidies last week, a few people have asked us about one particular factoid. In the leader we say:

By one count, such handouts [energy subsidies] led to extra consumption that was responsible for 36% of global carbon emissions in 1980-2010.

We repeat the figure elsewhere in the issue. It is taken from a recent working paper (see accompanying VOX article) by Radoslaw Stefanski, now at the University of St Andrews. How does Mr Stefanski reach such an alarming figure?

Historically, CO2 emissions for a given country have followed a hump-shaped pattern alongside income. Britain is the prime example of this.

The ECB makes its mind up

AFTER seemingly endless hints, rows and delays, the European Central Bank is finally launching a big programme of quantitative easing (QE), creating money to buy financial assets, in order to fight the euro zone’s slide towards deflation. From March this year until September 2016 the ECB will buy €60 billion ($68 billion) of assets a month, a total of €1.1 trillion over that period. The ECB has already been buying private assets, predominantly covered bonds (a safe form of debt issued by banks) but also asset-backed securities, since late last year at a rate of around €10 billion a month.

Quantitative easing and the euro zone

Ugo Panizza, of the Graduate Institute, Geneva, offers his thoughts on Thursday's press conference, when people expect the European Central Bank to announce quantitative easing.

IF THINGS go as expected, on January 22nd the governing council of the European Central Bank (ECB) will approve a programme of quantitative easing (QE), in which the bank uses newly issued money to buy sovereign bonds.

Switzerland's monetary policy

Switzerland’s cap on its currency, which it removed on January 15th, was unsustainable, protectionist and exposed the central bank to catastrophic losses, according to many commentators. Not so, argues Simon Cox of BNY Mellon Investment Management.

ON THURSDAY January 15th Switzerland’s central bank, the Swiss National Bank (SNB), removed the cap on its currency, which it had imposed over three years ago and reaffirmed only three days before its repeal. The doffing of the cap surprised and upset the foreign-exchange markets, hobbling several currency brokers, including Alpari (which happens to sponsor the London football team I support).

Quantitative easing and the euro zone

Paul De Grauwe, John Paulson Chair in Political Economy at the London School of Economics, gives his thoughts on the ECB meeting this Thursday, where Mario Draghi is expected to announce a programme of quantitative easing.

IT APPEARS that the European Central Bank (ECB) is ready to start a large programme of “quantitative easing” (QE): it will buy government bonds and in so doing will put money base into circulation.

There is still a lot of disagreement on the necessity of QE in the euro zone. I see two reasons why the case for QE is overwhelming. First, QE is merely a correction for what happened during the last two years.

A Syriza candidate speaks

Update, 27th January: Mr Varoufakis has been appointed the Greek finance minister.

Yanis Varoufakis is a professor of economic theory at the University of Athens and Syriza parliamentary candidate in the general election on 25th January. In November he outlined a plan to revive the euro-zone economy. Here he discusses quantitative easing in the euro zone.

MARIO DRAGHI will, on Thursday, make a momentous announcement against the backdrop of the euro zone’s continued fragmentation.

China's slowdown

MUCH of the analysis of China’s 2014 GDP data, which the government published today, has focused on the economy’s slowdown. That is, on one level, understandable. Growth of 7.4% was China’s weakest in 24 years (see chart below). It was also the first time this century that China has missed its official growth target, falling just short of the official goal of 7.5%. But on another level, the focus on the slowdown seems almost myopic. China joined an exclusive club last year: its economic output exceeded $10 trillion, making it only the second country to achieve that feat (America reached this level in 2000).

The ECB's momentous meeting

WHEN the European Central Bank’s (ECB) governing council meets on January 22nd, it will take a historic decision. Among the main central banks, the ECB alone has abstained from a big programme of quantitative easing involving the creation of money to buy sovereign bonds with the aim of spurring growth and inflation. The economic case for QE in the euro area is overwhelming: the feeble economic recovery that has followed Europe’s double-dip recession is faltering; headline inflation has turned negative and longer-term inflation expectations have also declined to a worrying extent.